2020

A significant change of the reporting and payment of Capital Gains Tax on private residences is coming this April (2020).

As of April 6, any UK resident who sells a residential property and makes a taxable gain will only have 30 days to report it to HMRC; rather than until the Self-Assessment deadline which previously could result in a period of up to 22 months before having to report the gain and pay the tax due.

Any Capital Gains Tax (CGT) arising after selling a residential property must also be reported and paid via a new online CGT return within 30 days of the completion date of the sale.

“The earlier payment of CGT on residential property allows the government to collect any tax owed more quickly,” said Nick Charnley, tax manager at Ellis & Co.

“Previously any tax gained was declared and then collected via a yearly self-assessment, now the deadline is only 30 days after the sale.

"Some taxpayers may not know if whether they will be a basic or higher rate taxpayer before the end of the tax year so will have to make a best guess approach to which CGT rate is applied to the gain and amend the CGT return if needed.

“Although the new form must be completed within this new deadline, the gain must also be reported on a self-assessment tax return," he added.

For further information on this, or any other tax matter, contact Nick on 01244 343504.

2019

The number of orders for pure electric cars has increased since the new benefit-in-kind (BIK) tax rates were announced.

The Government announced that company car drivers, driving a pure electric vehicle, will pay no company car tax in 2020-2021.

UK leasing firms have reported a surge in orders of electric cars since the BIK announcement back in July 2019.

The key decisions were:

for cars first registered from April 6, 2020, most company car tax BIK percentage rates will be reduced by 2 percentage points in 2020-21 before returning to planned rates over the following two years – increasing by 1% in 2021-22 and 1% in 2022-23

to accelerate the shift to zero emission cars, all zero emission models will pay no company car tax in 2020-21, 1% in 2021-22 before returning to the planned 2% rate in 2022-23

on Vehicle Excise Duty, a call for evidence will be published later this year seeking views on moving towards a more dynamic system which recognises smaller differences in carbon dioxide (CO2) emissions

In addition to the reduction in BIK rates, companies purchasing new electric vehicles can also write off the full cost of the vehicle against taxable profits. This could lead to a reduction in corporation tax of 19% of the purchase price of the vehicle.

“It’s no surprise that the number of orders for electric vehicles has soared, this is a real saving for company car drivers,” said John Moorhouse, accounts senior at Ellis & Co.

For further information about this or any other matter contact Ellis & Co on 01244 343504.

If you’re an employer and need to report your expenses and benefits for your employees and directors, you will need to complete a P11D form and then submit a P11D(b) form to HM Revenue & Customs by July 6, 2019.

The benefits and expenses you can claim on fall within the following 14 sections:

Section A – Assets Transferred (cars, property, good or other assets)

Section B – Payments made on behalf of the employee

Section C – Vouchers and credit cards

Section D – Living Accommodation

Section E – Mileage allowance payments / passenger payments

Section F – Cars and car fuel

Section G – Vans and van fuel

Section H – Interest free, low interest and notional loans

Section I – Private medical treatment or insurance

Section J – Qualifying relocation expenses payments and benefits

Section K – Services supplied

Section L – Assets placed at employee’s disposal

Section M – Other items

Section N – Expenses payments made on behalf of the employee

A separate P11D form will need to be used for every employee and director.

A copy of this form must also be given to your employees and directors by July 6, 2019.

It is very important to declare any expenses and benefits.

You will be liable for a fine of £100 per 50 employees for each month your P11D(b) is late.

Following the introduction of tax-free childcare for all from February 2018 the childcare voucher scheme was due to close to new entrants in April 2018.

This has now been extended by six months to October 2018.

The new Tax-free Childcare scheme began in 2017 and was opened to children of all ages on February 14, 2018.

The new scheme is available to the employed and self-employed where both parents are in paid work for more than 16 hours per week, regardless of whether the employer contributes.

The old scheme was only available to employed individuals

"The new scheme which parents contribute to and the Government tops up by 20% replaces employer childcare voucher schemes which will now remain open to new entrants for an extra six months until October 2018," said Peter Way-rider, tax manager at Ellis & Co.

"Parents already registered at that time can continue to receive vouchers for as long as their employer offers them, or switch to tax-free childcare instead.

"There are arguments for and against each scheme but you now have a further period of time to consider which one suits you."

For further information about the childcare voucher scheme, or any other tax matter, contact Peter on 01244 343504.

Marriage allowance lets you transfer £1,190 of your personal allowance to your husband/wife/civil partner – if they warn more than you.

This reduces their tax by up to £238 in the tax year (April 6 to April 5 the next year).

In order to qualify you must:

Be married / in a civil partnership

One spouse/partner must earn below the personal allowance of £11,850

Your partner pays income tax at the basic rate, with an income between £11,851 and £46,350.

If you’re in Scotland, your partner must pay the starter, basic or intermediate rate, which usually means their income is between £11,850 and £43,430.

“If you are eligible for marriage allowance in 2018/19 tax year you can back date your claim to April 5, 2015 and reduce the tax bill even further,” said Peter Way-Rider, tax manager at Ellis & Co Chartered Accountants and Business Advisers.

For further information about marriage allowance or any other tax matter, contact Peter on 01244 343504.

Individual Savings Accounts (ISAs) are one of the most popular ways to save.

With exemption from income tax and capital gains tax it’s easy to see why they are the main choice for savers.

The ISA savings limit for the tax year 2019/20 is frozen at last year’s limit of £20,000, meaning you can pay up to £20,000 into one ISA account (or across multiple ISA accounts) tax-free.

There are five main types of ISA: cash ISA, Help to Buy ISAs, innovative finance ISAs, stocks and shares ISAs, and now the Lifetime ISA.

There is also a Junior ISA, which will provide a child with a tax-free lump sum when they reach the age of 18; this allowance has raised from £4,260 to £4,368.

“The ISA allowance is set by the government each year, so the allowance doesn’t roll over to the next tax year, so if you don’t use it you will lose it,” said Peter Way-Rider, tax manager at Ellis & Co.

“You can open multiple ISAs but cannot pay in more than £20,000.

“To gain maximum benefit from your ISA you should open it at the start of the tax year (April 6), failing that as close to this date as you can.”

For further information on ISAs or any other tax issue contact Peter on 01244 343504.

2018

Following the introduction of tax-free childcare for all from February 2018 the childcare voucher scheme was due to close to new entrants in April 2018.

This has now been extended by six months to October 2018.

The new Tax-free Childcare scheme began in 2017 and was opened to children of all ages on February 14, 2018.

The new scheme is available to the employed and self-employed where both parents are in paid work for more than 16 hours per week, regardless of whether the employer contributes.

The old scheme was only available to employed individuals

"The new scheme which parents contribute to and the Government tops up by 20% replaces employer childcare voucher schemes which will now remain open to new entrants for an extra six months until October 2018," said Peter Way-rider, tax manager at Ellis & Co.

"Parents already registered at that time can continue to receive vouchers for as long as their employer offers them, or switch to tax-free childcare instead.

"There are arguments for and against each scheme but you now have a further period of time to consider which one suits you."

For further information about the childcare voucher scheme, or any other tax matter, contact Peter on 01244 343504.

April 2018 will see a £3,000 reduction in the tax-free dividend allowance.

The allowance, for shareholders and directors of small private firms, will decrease from £5,000 to £2,000 from April 5, 2018.

According to HM Revenue and Customs (HMRC) the change will affect individuals and households who receive dividend income in excess of £2,000; It is estimated that this will affect around 2.27 million individuals in 2018 to 2019 with an average loss of around £315.*

The reduction was announced by The Chancellor Phillip Hammond during his Spring Budget Speech last year (2017).

It was a move designed to provide ‘fairness’ and ‘reduces a tax perk that had been enjoyed by those trading through limited companies and by private investors’.

“This measure will ensure that support for investors is more effectively targeted and that the total amount of income they can receive tax-free is fairer and more affordable, in light of increases to the tax-free personal allowance and the Individual Savings Accounts (ISA) allowance,” said HMRC.

“It will also partially reduce the tax difference between the self-employed and those working through a company.”

The Chancellor said that HMRC estimated the cost of people working through companies at £6bn a year: “It’s not fair and it’s not affordable,” said the Chancellor.

2017

From April 2018 Wales will introduce Land Transaction Tax (LTT) its own version of Stamp Duty Land Tax (SDLT).

It is the first Welsh-only tax in almost 800 years.

Stamp Duty Land Tax (SDLT) is payable when you buy or lease a building or land over a certain price; the rate of tax due is calculated using a banding system.

Land Transaction Tax (LTT) uses the same banding system, however, instead of separating into residential and non-residential properties - LTT calculates tax owed based on residential banding only.

The Welsh Government has announced that nine out of 10 buyers will pay the same or less than they do at the moment; buyers of homes worth under £250,000 will pay £500 less in LTT, those buying up to £150,000 will pay no tax at all.

However, those one in 10 buyers will be paying thousands more than people in England, for example: LTT on a £750,000 house will cost £36,250 compared to Stamp Duty in England of £27,500.

The current rates*

Up to £125,000 no tax

Between £125k and £250k 2%

Between £250k and £925k 5%

Between £925k to £1.5m 10%

Above £1.5m 12%

The new rates in Wales (NB these rates relate to purchases, lease premiums or transfer values)*

Up to £150k no tax

Between £150k and £250k 2%

Between £250k and £400k 5%

Between £400k and £750k 7.5%

Between £750k to £1.5m 10%

Above £1.5m 12%

“Overall this is good news for buyers in Wales, but there will be some big winners and losers,” said Peter Way-Rider, tax manager at Ellis & Co.

“Some buyers will escape the tax bill completely, whereas the higher end buyers will end up paying more than those over the border.”

During last week’s Autumn Budget (2017) Stamp Duty Land Tax was abolished for first time buyers on homes under £300,000.

For further information about this or any other tax matter contact Peter on 01244 343504.

The secret to getting ahead is getting started, as the saying goes… and the season of the tax return is looming.

Personal Tax, Partnership Tax and Trust Tax Returns all need to be filed by January 31, 2018.

“January may seem a long way off, but filing your tax return sooner rather than later will give you more time to save or obtain finance for any tax claim,” said Peter Way-Rider, Tax Manager at Ellis & Co.

“Be sure not to miss the deadline date of Wednesday, January 31,2018, or you could be joining millions of others in the UK and incur an automatic fine of £100.

“Failing to file your tax return on time will cost you £100, you will pay more the later it gets.”

The penalties for late tax returns are:

1 day late an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time.

3 months late, additional daily penalties of £10 per day, up to a maximum of £900. This is as well as the fixed penalty.

6 months late, a further penalty of 5% of the tax due or £300, whichever is greater; this is additional to the penalties above.

12 months late, another 5% or £300 charge, whichever is greater. This is additional to the penalties above.

There are also additional penalties for paying tax late of 5% of the tax unpaid at 30 days, 6 months and 12 months.

“At Ellis & Co we will prepare your Self-Assessment Tax return for you and submit it promptly," added Peter.

“We will help you structure your affairs for maximum tax efficiency, while protecting you from the penalties every taxpayer dreads.

“We can also advise on short term finance if required.”

For further information about Tax Returns or any other tax matter contact Peter on 01244 343504.

The Government has launched two new childcare schemes this year in order to help working parents with childcare costs.

Tax-Free Childcare account: Topped up £2 by the Government for every £8 that is paid in. Open to children who will be aged 4 on August 31, 2017. Can be used by all working parents, including the self-employed.

If yes then read on - as you may be eligible to claim Research and Development (R&D) Tax Relief.

R&D tax relief came into effect in 2010 with the aim to encourage UK based companies to spend more on Research and Development.

If your business spends money developing new or enhancing products or services in science or technology then you could receive a cash payment or a reduction on your Corporation Tax liability.

“Many businesses don’t know they can claim R&D tax relief, or how to go about it,” said Peter Way-Rider, tax manager at Ellis & Co.

“There are a number of costs that qualify for R&D including employee costs, materials, utilities and software.

“The normal time limit for making your claim is two years after the end of the relevant Corporation Tax accounting period.

“This means that event though you may have already filled a Corporation Tax return, you can amend this to reflect any relevant R&D expenditure as long as the amended return is filled within the time limits.”

Ellis & Co can tell you if you are eligible for R&D relief, the full list of expenditure allowable and how much you can claim.

2016

Cars do not qualify for the annual investment allowance. However, it is possible to obtain full relief for expenditure on a car in the year of purchase if you buy a low emission car that qualifies for a first year allowance (FYA) of 100%.

If the expenditure is incurred between 1 April 2015 and 31 March 2018, the FYA is available for cars with CO2 emissions of up to 75g/km. Expenditure on cars with CO2 emissions in excess of 75g/km do not qualify for a FYA, only the writing down allowance.

For more information on this matter please contact Peter Way-Rider, Tax Manager on 01244 343504.

If your business is able to claim the Employment Allowance, we would suggest an annual salary of £11,000 with dividends of £32,000 giving a total remuneration package of £43,000, meaning only basic rate tax is payable (see below).

Gross salary

£11,000

Dividends

£32,000

Total Gross Income

£43,000

Employees Nat. Ins.

£355

Tax on dividends

£2,025

Net cash taken home

£40,620

If you are unable to claim the Employment Allowance (as you are a single director/employee limited company), the most suitable route provides for a gross salary of £8,040 which protects your entitlement to the State Pension and benefits plus dividends of £34,960. This again provides for a total salary/dividend package of £43,000.

In this case the overall return is as follows:

Gross salary

£8,040

Dividends

£34,960

Total Gross Income

£43,000

Employees Nat. Ins.

£ Nil

Tax on dividends

£2025

Net Cash taken home

£40,975

Overall, it would appear that there still remains some confusion as to which option is the most suitable, as option 2 obtains less Corporation tax relief due to the lower salary level. Please contact Ellis & Co.’s Tax Manager, Peter Way-Rider, to discuss which option is best for you.

Business owners are coming to terms with controversial dividend tax changes that came into effect on April 6 this year.

Under the changes, the notional 10% tax credit on dividends was abolished and a £5,000 tax free dividend allowance introduced.

While this is fine for those individuals who dabble in shares, the impact on many owners of SMEs has been considerably less welcome.

That explains why there was a surge in dividends taken from companies in the lead up to the April change.

As of April 6:

The first £5,000 of any dividend tax is free.

Lower rate tax-payers pay tax at 7.5% instead of 0%.

Higher rate tax-payers pay tax at 32.5% instead of 25%.

Upper rate tax-payers pay tax at 38.1% instead of 30.55%.

Owners of SMEs have rightly reacted with dismay to the changes. Many believe the measures are intended to hit small companies which pay a small salary to preserve entitlement to the State Pension, followed by a significantly larger dividend in order to reduce National Insurance costs.

For example, a couple splitting combined income of £100,000 a year will find themselves worse off by more than £3,000.

Peter Way-Rider, Ellis & Co’s Tax Manager, said: “There is a feeling among many owners of small businesses that this is a tax on entrepreneurialism. It is the business owners who are taking the risks, investing in their communities and creating jobs.

“There was a lot of anger when the change was first announced with over 60,000 people signing a petition against it, but now that the measures have taken effect there is unlikely to be any going back.

“Despite the changes, remuneration through dividends will in most cases remain a more tax efficient option than taking a full salary.”

For advice on this and any other business tax issue, contact Peter Way-Rider on 01244 343504 or email: peterway-rider@ellis-uk.com

Do you rent out your spare room? Are you making the most from your property?

The ‘Rent-A-Room’ relief scheme is an optional tax exemption scheme that allows property owners who let out spare furnished rooms in their only or main home to receive up to £7,500 per annum gross and not be subject to tax.

If the rent received exceeds £7,500, the first £7,500 is tax free, income tax being paid on the balance. This obviously covers income from lodgers and may also be applied to bed and breakfast or guest houses which would usually be assessed as a trade.

The exemption limit of £7,500 is reduced to £3,750 if, during the tax year, someone else receives income from letting from the same property.

The £7,500 limit is not reduced if the room is let for less than 12 months. The same amount applies, therefore, even if the room is rented for only one month or just in term time.

The owner and lodger must occupy the property for at least part of the letting period in each tax year of claim.

"This is an excellent way of obtaining rental income without having to purchase a 'buy to let' property", said Peter Way-Rider, Tax Manager at Ellis & Co.

If you have a question about the scheme, please contact Peter on 01244 343504 or email: peterway-rider@ellis-uk.com

We are now beginning to approach the Christmas season, so perhaps now is a timely reminder that for personal taxpayers, any tax due in respect of the year ended 5 April 2016 needs to be paid to HM Revenue and Customs by 31 January 2017, along with the first payment on account for the year ending 5 April 2017.

For limited companies with year ends of 31 March, the liability for the year ended 31 March 2016 needs to be settled by 1 January 2017 (New Year’s Day).

If any tax is paid late, HMRC will charge interest and for individuals, in addition to interest, a surcharge of 5% will be imposed on any tax still outstanding at 28 February 2017.

If you require assistance in settling any tax liability you may be able to agree to pay by instalments by calling the Business Support Helpline.

For advice on this and any other business tax issue, contact Peter Way-Rider on 01244 343504 or email: peterway-rider@ellis-uk.com